Liam Vaughan has been covering financial markets for a decade. His Flash Crash: A trading savant, a global manhunt, and the most mysterious market crash in history is a well-received book. It is a real-life financial thriller that offers an in-depth look into one of the most notorious market crashes and its aftermath
"The world is full of obvious things which nobody by any chance ever observes."
― Arthur Conan Doyle, The Hound of the Baskervilles
It was the start of a regular morning for Mr Nachhattar Singh Sarao, on April 21, 2015, a well-respected man in his late 60s, and a long term resident of Hounslow. Little did he know that he was about to answer the door to the police who were there to arrest his football-crazy son Navinder Singh Sarao, the man accused of fraud, market manipulation and being the perpetrator of the infamous "Flash Crash" of 2010.
It might have come as a shock to Nachhattar and the rest of the family, but for Navinder Singh Sarao, or Nav for short, it was just a normal day.
He spoke casually to the police, half-awake and careless, as if the world never moved a bit around him. He did not resist arrest, and he requested the police to let him record the football match that was going on.
But the most intriguing part of the story is that he never got to hold on to the $70 million worth of cash he had made through trading. Most of his money seemed to have gone into Ponzi schemes, which made him unable to even secure bail.
Liam Vaughan has been covering financial markets for a decade. His Flash Crash: A trading savant, a global manhunt, and the most mysterious market crash in history is a well-received book. It is a real-life financial thriller that offers an in-depth look into one of the most notorious market crashes and its aftermath.
The infamous flash crash was so complex and volatile that it forced authorities to investigate haystacks of algorithms and still end up with inconclusive results. The US market melted so much that it lost around $1 trillion within just twenty minutes.
The media named Sarao the "The Hound of Hounslow" and the "Flash Crash Trader".
Vaughan was a reporter for Bloomberg at the time of Sarao's arrest. But he never left working on the project. This book evidently took a great toll on him even though it was worth the effort considering the fascinating tale it tells.
Vaughan has treated this strange project as an elaborate stage play and divided this book into three acts, with a prologue and an epilogue. Each act contributed to several aspects like Sarao's genius, a short history of trading and spoofing, the crash and its aftermath, Sarao's arrest, his trial, release and the lost money.
The first act of the book gives us the story of Sarao's childhood, his involvement in trading and his meteoric rise. The other two acts are about Sarao's rage against the machines, his armada, also known as the flash crash, his investment failures, the whistleblower Mr X's revelations about Sarao, his legal battle and release.
In Sarao's mind, it never registered that what he was doing was wrong. To him, he was just levelling the field against the High-Frequency Trader (HFT) robots. He thought of himself as a victim of these machines.
His act of anarchy somehow makes us question the future of crimes on the internet. Beyond this 'out of the blue' manhunt and shocking market meltdown, there is also an undercurrent that the author alludes to throughout the book. He questions how the companies are being regulated, how they are manipulating the market and how the new elite has been influential in controlling the prices of our food and fuel as they rake in the big profits.
Perhaps the biggest moral of the story is how something as mundane as a lone trader in his bedroom can crash the whole monetary system with some weird algorithmic combinations.
Sarao's stunts in HFT, his lack of respect for others and the apparent altruism altogether make up this crazy story.
His math skills were awesome, instincts sharp, and his reaction time was lightning quick. He is not only a fearless trader but also a failing man who played the same game too well, got bored and tried to beat it with his own modifications. He never went into it for the money, it was an elaborate video game for him and at the end, it got the best of him.
The vulnerable financial systems of the world have been questioned by this book. Sarao might be the tip of the iceberg. The crazy story of a mad genius who beat the market with an ordinary computer in his parent's house is one that people will talk about for ages, with prospects in Hollywood.
This book raised a lot of eyebrows about the foggy nature of digital age morality and the nature of the market. It is hard to put down with an ending that literally did not end.
Vaughan simplified some aspects of complex trading for regular readers. Although, the detailed history could have been avoided.
The reason this book exists in the first place is for Sarao and his involvement in the flash crash, and Vaughan stayed true to his story. His prose is lucid and engaging, as if he has written a real-life thriller about a dusty business that never settles.
The world is full of rather obvious loopholes, yet we choose not to look in the right place. Reality is shown to us in different lights and perhaps the undercurrent of truth goes unnoticed. As Franz Kafka wrote in The Trial "The right understanding of any matter and a misunderstanding of the same matter do not wholly exclude each other."
We are indeed living in a world full of sliding doors. Iconoclasts like Sarao make us question the true nature of reality.